Calling All Women: It’s Time To Take Control Of Your Finances!

Sep 2020

According to a recent survey, although 95% of women are directly involved in their households’ financial decisions, less than 20% of them said they feel very prepared to make wise financial decisions. Half of the women surveyed also indicated they need some help, but yet just one-third had a detailed financial plan and 60% said they rely on family and friends, rather than financial professionals, for investment information. 

The good news is that those who use professional financial advice are more on track to reach their financial goals than those who don’t. 

Although it is very important for everyone to develop (and maintain) a financial plan, it is more important for women to do so since women, in general, live longer and earn less than men. The longer life expectancies of women mean they are more susceptible to rising health care costs and other expenses that are borne disproportionately by the elderly. In addition, women generally have less years in the work force and as a group earn less than men. As a result, it is essential that women have a better understanding of their financial plan.

When it comes to financial preparedness, women should focus on some key areas:

Financial Planning–A key part of financial planning is not only accumulating wealth, but also protecting wealth and generating retirement income. Because women have longer life expectancies this mean women have to rely on their portfolios to maintain their standard of living longer than men. These days, women have a good chance of living well into their 90s, so a retirement portfolio needs to be able to generate both income and growth. Failure to do so increases the risk that she will run out of money and be totally reliant on her family or just social security during her later retirement years. No longer can a retirement portfolio ignore growth assets such as stocks. Because fixed income assets – bonds, cd’s, etc. – have such low yields, to keep pace with inflation a portfolio needs “riskier” assets such as stocks. A woman who retires in 2020 can easily live 30+ years in retirement. By any measure that is a long time. The longer the time period the less risky it is to invest in stocks.

Since women are generally more conservative investors, there often is a desire to avoid stocks because of the risk associated with stocks as women approach retirement. Although it is normal to reduce the risk level in the portfolio as people transition to living off of wages to a fixed income, it is very important to maintain at least a portion of the portfolio in stocks for growth. Since bonds and other fixed income investments are at historic low yields, relying on these types of investments will not provide the growth the portfolio will need in the years to come. Having a portfolio that is too conservative is equally as dangerous to your financial well-being as having a portfolio that is too aggressive.

Estate Planning -While it is important for women to develop a solid financial plan, it is just as important to ensure that their assets are protected.  That’s why a vital part of financial planning is to develop an estate plan that will ensure that assets are distributed according to her wishes upon death. Such things as a will, trust and durable and medical powers of attorney are important areas to focus on, and it is advisable to seek the advice of an estate-planning attorney to ensure that your “planning” is done properly.  

Long-Term Care – Since the likelihood of women living on their own during retirement is great, it is also important to plan for their long-term care in the event they become ill or disabled.  While some woman may have a good family support system to provide care, many don’t.  Even those that have family support don’t want to burden their family members with the task of caring for them as they age.  That’s why women should become knowledgeable about long-term care insurance and determine whether it makes sense for them to purchase a long-term care policy.

According to a 2019 Genworth Cost of Care Survey, the national average cost of a private one bedroom Assisted Living Facility was $48,612 per year and $90,155 per year for a private Nursing Home Care room. These costs have steadily increased and will likely continue to increase for the foreseeable future. It is obvious, therefore, that long-term care can deplete one’s retirement portfolio quickly. 

58% of women 65 and older are estimated to need long-term care during their lifetimes. And according to the Kaiser Family Foundation, 70% of all people in nursing homes are women. Despite the cost of long-term care, not everyone needs a long-term care policy, but everyone, and women most particularly, need a plan to provide for their long-term care.

Some people use long-term insurance policies to protect them and their families from these costs. Unfortunately, policies for long-term care vary greatly in both price and features, so working with a knowledgeable insurance professional is important to make sure you buy a policy that fits both your needs and budget. 

It’s Not Too Late to Get on Track with a Financial Plan

With the on-going volatility in the stock market, coupled with the chances that women can live well into their 90s and beyond, having a solid financial plan is more important than ever.  Unfortunately, too many women aren’t prepared to meet the financial challenges of the future.  The good news is that women are aware of the importance of becoming more financially aware, and by developing a solid financial plan now, they still have a good chance of meeting their financial goals for the future.


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